April 2, 2013

Top 10 Richest Colleges for 2012—The Biggest Endowments

After a big year in 2011, these 10 colleges’ funds rose at a much slower rate last year

Will John Harvard still be sitting pretty, or will another college knock him off his pedestal? Will John Harvard still be sitting pretty, or will another college knock him off his pedestal?

More than a year has passed since our last look at our list of the Top 10 Richest Colleges for 2011, so we’ve updated our results for 2012.

When we last checked in, the endowment funds had rebounded from the lean investment years following the Great Recession. Last year was a bit of a retreat as rates of return on investments dipped, with Harvard even falling into negative territory. Some funds ended the year with lower balances because investment returns did not cover expenses.

According to the NACUBO-Commonfund Study of Endowments, which gathers data from 831 U.S. colleges and universities, these institutions’ endowments lost an average of 0.3% (minus fees) for the 2012 fiscal year (July 1, 2011 to June 30, 2012). That’s a sharp drop from the 2011 average gain of 19.2%. The endowments in the NACUBO study suffered disproportionately from their investments in international equities, losing an average of 11.8%, with fixed income, though, softening that blow by gaining an average 6.8%.

All schools on the list have fiscal years that end in June, and they release those results soon after, except Emory, which routinely delays reporting till January. Therefore, the amounts of the endowments are as of June 30, 2012. Here, then, are the Top 10 Richest Colleges for 2012 with the percentage gain or loss in the value of their endowment compared with fiscal 2011.

President Jimmy Carter at Emory University. (Photo: AP)10. Emory University:
$5.4 billion, up 15%

2011 Ranking, No. 10: $4.7 billion

The Atlanta school’s endowment dipped to $4.7 billion in 2011 (those results were announced too late for our last report), but rebounded with a 15% increase in 2012.

Mary Cahill, vice president of investments and chief investment officer, leads the Emory Investment Management team, using expertise gained at Merck and Xerox among other places.

University of Chicago athletic center.9. University of Chicago:
$6.57 billion, up 6.8%

2011 Ranking, No. 9: $6.3 billion

Founded by John D. Rockefeller, who wanted to do more than just give money to a college (he had no alma mater), the school saw its endowment grow by 6.8% last year.

The fund is managed by Prakhar Bansai, Elisabeth F. Roth, Andrew James and David Warn. Bansai came from Mornigstar; Roth had worked at BMO Capital Markets and Merrill Lynch; James held several positions for Allstate Insurance, and Warn worked for Morgan Stanley in London. The team maintains a diversified portfolio with the largest segments being in the absolute return and private equity categories.

University of Pennsylvania President Amy Gutmann. (Photo: AP)8. University of Pennsylvania:
$6.8 billion, up 1.6%

2011 Ranking, No. 8: $6.58 billion

Penn, like others, posted a small gain in 2012, coming in at 1.6%. 

We noted in our last report that Kristin Gilbertson, who came from form Stanford’s endowment fund and has been Penn’s chief investment officer since 2004, told the school’s newspaper, The Daily Pennsylvania, that the endowment fund has diversified its strategy in recent years, moving away from a heavy reliance on stocks and adding other private equity investments like real estate to the mix.

Student walking on Notre Dame campus. (Photo: AP)7. University of Notre Dame:
$7.5 billion, up 3.1%

2011 Ranking, No. 7: $7.3 billion

Notre Dame managed a return of 3.1% on its endowment fund in 2012.

Led by Notre Dame grad Scott Malpass, the fund not only invests well, but follows Catholic precepts when doing so.

"We comply with the bishops' guidelines on investing, so we have some restrictions based on Catholic social teaching," Malpass, who worked at Irving Trust Co. on Wall Street before returning to South Bend, is quoted as saying on the university’s website. For example, Notre Dame's investment managers would not work with companies involved in stem cell research, contraceptives or pornography.

Columbia University Library

6. Columbia University:
$7.65 billion, up 2.3%

2011 Ranking, No. 6: $7.8 billion

Columbia saw a 2.3% rate of return in its endowment, which was not enough to offset expenditures from the fund.

The Columbia Investment Management Co. was formed in 2002 with N.P. Narvekar moving from the University of Pennsylvania to be its president and CEO. Peter Holland is chief investment officer of Columbia’s fund.

Students on MIT campus (Photo: AP)5. MIT:
$10.3 billion, up 8%

2011 Ranking, No. 5: $9.9 billion

The Massachusetts Institute of Technology had a better year than its Top 10 rivals, netting an 8% return on its endowment fund.

Led by Seth Alexander, president of the MIT Investment Co., the fund has grown by 67% from the $6 billion it was worth in 2006 when Alexander moved over from Yale. The fund’s portfolio’s primary focus is on equities. Over the last five years, the annualized return has been 6.3%.

Stanford University library.4. Stanford University:
$17 billion, up 3.1%

2011 Ranking, No. 4: $16.5 billion

The Stanford Management Co., founded in 1991, had a return of 3.1% in 2012. 

The school’s investments are directed by John F. Powers, president and CEO, who holds an MBA from the Stanford Graduate School for Business and previously worked for Offit Hall Capital.

Nassau Hall at Princeton. (Photo: AP)3. Princeton University:
$17 billion, up 3.1%

2011 Ranking No. 3: $17.1 billion

Princeton’s endowment fund managed a 3.1% rate of return last year, but the balance dropped by a small amount.

The Princeton University Investment Co. has been led by its president, Andrew K. Golden, since 1995. Golden previously had helped direct the endowments at Duke and Yale. When he joined the fund it was worth $4 billion. Golden was a proponent of the Swensen strategy devised by Yale’s investment chief. The strategy, which calls for heavy investing in nontraditional investments like real estate, private equity and timber, came under fire during the Great Recession.

Yale's coat of arms.2. Yale University:
$19.3 billion, up 4.7%

2011 Ranking, No. 2: $19.4 billion

Yale was another school that saw a positive rate of return (4.7%), but had to lower the overall balance of its endowment to meet expenses.

David Swensen, its chief investment officer, is the father of an influential endowment investment strategy that bears his name. While controversial, the idea has caught on with other schools looking for ways to maximize the growth of their funds.

Statue of John Harvard on Harvard's campus.1. Harvard University:
$30.7 billion, down 0.5%

2011 Ranking, No. 1: $32 billion

Harvard still has the largest endowment of any university in the U.S., even after a rate of return of -0.5% in 2012. That was quite a comedown from a 21.4% rate of return the year before.

Led by its president and CEO, Jane Mendillo, who came from Wellesley’s fund in 2008, the fund has retooled its strategy, emphasizing liquidity. With the new strategy, the fund is climbing its way back to its record high of $36.9 billion reached before the Great Recession.

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